## Facts

- Prudential Realty Group owned a commercial property complex known as Bala Plaza in Montgomery County, Pennsylvania, and used CB Commercial Real Estate Group and broker Douglas Joseph to market it.
- On May 13, 1996, Prudential and prospective purchaser GMH Associates, Inc. executed a Letter of Interest (LOI) setting out major terms, including an “AS IS” sale price of $109.25 million, a due diligence period, and target dates for a written contract and closing.
- The LOI prominently stated it was not an enforceable contract, allocated the risk that no contract would be executed, and allowed either party to terminate negotiations at any time before a written contract without liability.
- The LOI also contemplated further approvals within Prudential and acknowledged unresolved matters.
- During due diligence, GMH identified issues and sought a $3 million credit, which Prudential rejected; GMH’s financing plan depended on a lease/purchase arrangement with AHERF, whose delayed commitment slowed progress.
- After the target dates passed, Prudential negotiated with another buyer while discussions with GMH continued and did not disclose those negotiations to GMH.
- GMH later sent a revised LOI reflecting a proposed compromise but repeating the LOI’s nonbinding language; Prudential did not accept it and sold Bala Plaza to the other buyer for about $108.5 million.
- GMH sued for breach of an asserted oral contract, fraud, and reliance-based theories, claiming Prudential promised to keep the property off the market.

## Issues

1. Whether an enforceable oral contract for the sale of Bala Plaza was formed despite the LOI’s express nonbinding terms and unresolved deal points.
2. Whether Prudential’s alleged assurances and nondisclosure of parallel negotiations constituted actionable fraud or misrepresentation.
3. Whether promissory estoppel or similar reliance theories could apply given the LOI’s risk allocation and termination-without-liability clause.
4. Whether compensatory and punitive damages could stand absent a binding contract or actionable fraud.

## Decision

- The Superior Court of Pennsylvania reversed the trial court and ordered entry of judgment notwithstanding the verdict for Prudential, CB Commercial, and Joseph.
- The court held no enforceable oral contract existed because the LOI was expressly nonbinding and the parties lacked mutual assent on essential terms; GMH’s later “acceptance” functioned as a counteroffer.
- The court held GMH failed to prove actionable fraud or misrepresentation because reliance on any “off the market” assurances was unjustifiable in light of the LOI, and there was no disclosure duty in the arm’s-length negotiation setting.
- The court rejected promissory estoppel because the LOI expressly negated enforceable obligations and allocated the risk that no contract would be executed.
- Because contract and tort theories failed, the trial court’s approximately $30.34 million compensatory and punitive damages award could not stand.

## Legal Principles

- A letter of intent that unambiguously disclaims contractual enforceability and permits termination of negotiations without liability is treated as nonbinding, not as a contract for sale.
- An enforceable contract (including an alleged oral agreement) requires mutual assent on all essential terms; ongoing disputes and material open issues defeat formation.
- Where an LOI allocates the risk that negotiations may fail, a party’s reliance on informal assurances inconsistent with the LOI is not justifiable as a matter of law.
- In arm’s-length negotiations without a binding agreement, nondisclosure of negotiations with alternative buyers is not fraud absent a duty to disclose.
- Promissory estoppel cannot be used to obtain contractual or quasi-contractual relief that would negate an explicit, negotiated nonbinding disclaimer and risk allocation.

## Conclusion

The court entered judgment for the seller and brokers because the parties’ LOI expressly foreclosed contract formation and liability during negotiations, and the record showed no completed oral agreement, no justifiable reliance supporting fraud, and no basis for promissory estoppel or damages.


GMH Assocs., Inc. v. Prudential Realty Grp., 752 A.2d 889 (Pa. Super. Ct. 2000)